Supply And Demand Simulation

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Introduction

The Supply and Demand simulation involves acting as Property Manager for GoodLife Management, a property management firm that manages apartment complexes in Atlantis. This simulation was an exercise in applying the supply and demand concepts based on current market trends. The property manager is required to adjust the monthly rental rate of two-bedroom rental apartments and number of apartments available. Supply and demand within the simulation were manipulated by the rates charged for the rentals, the economy, income, and personal choice. All of these characteristics affect the proportion of vacant as well as occupied apartments.

Simulations

In the beginning of the simulation GoodLife Management held the monopoly in Atlantis on two-bedroom apartments and therefore could lower the rent to increase quantity demand and increased the revenue for the property management company. This move ultimately resulted in a low vacancy rate in the apartments. After the revenue reaches maximum, demand then decreases. The solution is to decide at what level the rental rate presents the highest possible returns with a low vacancy rate.

The next section of the simulation presented the concept of the supply curve to exhibit the price necessary to lease all the offered apartments. More apartments were supplied as soon as rental rates were increased. “The law of supply states: Quantity supplied rises as price rises, other things constant; The Quantity supplied falls as price falls, other things constant” (Colander, 2006, p. 97). A higher rental price is an incentive to supply more rentals which would be a cost benefit to GoodLife Management, as it would cover all the maintenance costs enabling all of the apartments to be rented o...

... middle of paper ...

...t much trouble. When asked to make adjustments that would affect supply and demand this student made the modifications based on the factors given. The four key points that were first introduced through the text assigned to the class by D. Colander were reinforced in the simulation equilibrium, supply and demand, price ceiling and shift in demand and supply. This student actually did the simulation more than once in order to fully comprehend the concept of supply and demand.

References

Colander, David C. (Ed.). (2006). Economics (6th ed.). . [University of Phoenix Custom Edition e-Text]. Burr Ridge, IL: Irwin/McGraw-Hill, 2006. Retrieved November 13, 2008, from ECO/360.

University of Phoenix, (2008). Applying Supply and Demand Concepts. Retrieved November 13, 2008 from University of Phoenix, rEsource, Simulation, ECO360 - Economics for Business I, Student Website.

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